from Too Much: A Commentary on Excess and Inequality:
On Wall Street, Making Losing
a Winning Proposition Shareholders are losing their shirts, families are losing their homes, financial industry workers are losing their jobs, but investment bank bonuses have never been higher. Can anyone explain why?
November 26, 2007
They don’t just make deals on Wall Street. They make myths. And last week Wall Street's myth-making machine was roaring at full throttle — after the news broke that America’s five biggest investment banks will this year shell out a record $38 billion in bonus pay.
To justify the financial industry’s annual bonus blitz, friends of Wall Street fortunes usually recycle some variation on that most elemental of investment banker fables, the wealth creation myth. Wall Street’s movers and shakers, we are assured, create fabulous wealth. They richly deserve an appreciable share of the wealth they create.
This year, that wealth creation myth rings a bit hollow. Over the last 12 months, the movers and shakers of Wall Street have presided over a colossal loss of wealth. Shareholders at Wall Street’s five biggest banks have lost $74 billion off the value of their stock holdings.
The banks themselves have written off over $26 billion in losses, with most of that linked to investments in bonds tied to subprime mortgages. Nearly 2 million of the families holding those mortgages, analysts estimate, will have lost their homes — their single largest family asset — by this time next year.
And over 42,000 workers in New York’s financial industry, so far this year, have already lost their jobs.
So how, amid this torrential loss of wealth, can Wall Street bonuses be flowing at even higher levels than last year? Trying to answer that question kept the myth-makers hopping last week.
Wall Street giants like Bear Stearns and Merrill Lynch, these mythologists acknowledged, have certainly registered big-time losses this year. But these powerhouses, the new myth goes, can’t afford not to shell out big bonuses. .....(more)
The complete piece is at:
http://www.cipa-apex.org/toomuch/articlenew2007/Nov26a.html